April 25, 2023 - Solange Berstein, Chairwoman of the Financial Market Commission (CMF), presented today the 2022 Institutional Public Account. During the event, held at Palacio Pereira in Santiago, Mrs. Berstein stressed the importance of the Commission's institutional mandate to ensure proper functioning, development, and stability of the financial market, facilitating the participation of market players and promoting the protection of public trust. "We have the conviction that a deep, solid financial system plays a crucial role in the welfare of the people and the growth of the country," the Chairwoman stated.
As of December 2022, the Commission supervised over 7,000 entities, representing about 78 percent of the country's financial market assets, equivalent to about USD 543 billion and 2.1 times the country's GDP.
Berstein pointed out that the CMF made progress in the fulfillment of its 2020-2022 Strategic Planning process last year, which had the definition of a new internal operating model as one of its main results. Since the second half of 2022, the CMF began a new strategic planning process for the period 2023-2026, which involves the participation of its personnel, financial market stakeholders and members of the Civil Society Council.
Eight strategic objectives were defined for this new period between 2023 and 2026, which consider initiatives in the prudential, conduct and market development areas and incorporate the Commission's mandate in these three issues. In turn, other initiatives contribute to the fulfillment of the CMF's mandate through adequate institutional positioning; development of its personnel; incorporation of technology and advanced use of data; and consolidation of its integration and improvements to its institutional governance.
2022 Achievements
During her presentation, the Chairwoman stated that last year's lower growth, higher inflation, and interest rate hikes marked the economic scenario. Among the main risks faced by the economy and the financial system, Mrs. Berstein mentioned a deterioration of the external scenario, reflected in a tightening of global financial conditions and greater uncertainty. Given the context, there are economic sectors and households in a situation of greater vulnerability, alongside a capital market significantly affected by pension fund withdrawals, which translates into fewer possibilities to access long-term financing. The overall decline of loans was due to adjustments in economic activity and the implementation of a contractionary monetary policy, in parallel with an increase in the levels of arrears in consumer loans. Mrs. Berstein said that stock market transactions and amounts under management in investment portfolios of mutual and investment funds showed real drops in the face of greater market volatility.
Among the main institutional management milestones, the Chairwoman mentioned the approval of the new Fintech Act; regulatory advances in the implementation of the Market Agents Law and Basel III standards; full compliance with prudential supervision and market conduct programs; the launch of the Online Insurance Inquiry System; and the implementation of General Rule 461 on integrated reports with ESG standards. "The efficient protection of citizens and SMEs that use financial products is a central part of our actions. The Market Agents Law makes decisive progress in this area, as does the recently approved Fintech Act. Promoting fair treatment, offering suitable products, complying with advisory functions, and responding in a timely manner should be a priority among financial market players," said Mrs. Berstein.
Solange Berstein highlighted the strengthening of the Commission's financial education, development, and inclusion plan. In particular, the Chairwoman stressed the importance the publication of the CMF's Financial Education Policy and the creation of the Financial Education Committee. In regulatory affairs, the CMF issued a total of 91 regulations in 2022, processes which consider public consultations and regulatory impact reports in appropriate cases. 54 percent of regulations issued last year corresponded to the insurance sector, 30 percent to banks and financial institutions, and 16 percent to the securities sector.
On supervision, the CMF performed 69 visits to 169 supervised institutions, and carried out 198 market conduct supervisory procedures. Mrs. Berstein also highlighted an increase in the number of registrations and authorizations of financial instruments and the incorporation of new issuers and payment operators, as well as the implementation of the Registries of Investment Advisors and Insurance Sales Agents.
In terms of citizen support and services, the CMF has a robust offer of channels for citizen attention for making queries, claims or requests for information. For example, there was an increase in the number of requests for the Debt Report prepared by the Commission, which exceeded 4 million in 2022.
As for the sanctioning area, where the Commission's Investigation Unit is responsible for conducting investigations and filing charges for facts susceptible to administrative infractions, Solange Berstein detailed an increase in the number of complaints, procedures, investigations, and sanctions during 2022. In addition, she valued positively the consolidation of an alerts system aimed at warning financial clients about potentially fraudulent activities. 50 alerts were issued about said type of entities last year.
Main Challenges
Mrs. Berstein emphasized the importance of continuing to improve the financial system's legal and regulatory framework to benefit the public. Although Chile has a solid financial system, "we must not be complacent, as there are still many gaps in access to savings products, electronic payment systems, and multiple insurance products. Closing these gaps with suitable products requires a coordinated effort between the regulator and its various stakeholders," she said. "Adequate prudential regulation and supervision is vital, but especially an active and prospective risk management by the senior management of institutions. We saw this in the case of Silicon Valley Bank in the United States where, beyond the weaknesses in regulation and supervision, there were failures in risk management."
Among the main risks for the financial market in 2023, the Chairwoman mentioned an increase in credit risk, especially for consumer loans and some segments of the non-residential real estate sector; possible episodes of financial volatility as monetary stimuli are withdrawn in developed economies; and the advance of cybercrime. Mrs. Berstein added that Chile must continue to move forward with an agenda to strengthen its financial system, highlighting in this area initiatives such as the financial system resilience bill; a consolidated debt registry; risk-based capital framework for insurance companies; financial conglomerates; and bank resolution. "Pension fund withdrawals and life annuity advance payments have generated a clear and persistent deterioration in the financial system, which has translated into less access to long-term credit, higher inflation, and higher interest rates," she said.
"The CMF has emphasized the importance of a technical and constructive dialogue in the process of conversation, discussion, and implementation of measures to make our financial system more robust, always keeping the citizens at the center of it all," the Chairwoman concluded.
Links to Relevant Documents
